Developing Rates for Small Systems by American Water Works Association

By American Water Works Association

Now, constrained information or assets should not have to maintain your small application from constructing a fee constitution that recovers your entire charges and is reasonable in your shoppers.

This respectable handbook of perform can provide the step by step information you must ascertain your profit standards, examine your charges for various purchaser periods, boost a financial statement, and layout a greater cost constitution -- no matter if you've got restricted assets and information

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Example text

This is a larger issue for some water utilities than it is for others. For those who do not have sufficient information to conduct this type of analysis, there are various industry standards that are in use. A 45- to 90-day (approximately 6 to 13 weeks) O&M reserve is a frequently used industry norm. Because of the potential delay in payment, many utilities attempt to keep an amount of cash equal to at least 45 days or one eighth of their annual cash O&M expenses in an operating reserve to mitigate potential cash flow problems.

That is, for every dollar of capital funded from rate revenues, one dollar must be collected from rate revenues. , 20 years). Grant funding does not typically impact rate revenues, with the exception of when the grant requires matching local funds. The total anticipated annual capital funding required from rates (line 12 in Table 2-3) would be carried forward to the example financial plan, shown in Table 2-4 line 14, as the rate-financed capital costs component of the financial plan. The fact that water utilities are made up of long-lived infrastructure and must plan for capital improvements over many years is an important reason to establish a financial plan.

It is also important to understand the nature of the cash balances. If extra cash is available in the operating or revenue fund because water demand exceeded projections and generated surplus water sales revenues, those monies should generally be available for any water utility purpose. However, if extra cash is available because system development charge revenues exceeded projections, those monies are usually restricted to being spent on the capital projects used to justify the charge, or for debt service.

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